Karachi, February 03, 2023 (PPI-OT): Weekly Review

KSE-100 index witnessed a volatile session mainly attributable to ongoing talks with IMF to ensure its prerequisite conditions are implemented which includes high circular debt which is hovering around PkR2.5trn for power sector and PkR1.6trn for Gas sector while restricting subsidies only to vulnerable domestic consumers. Furthermore, the lender has also demanded political consensus given that opposition might create hurdles in the way of implementing tough economic decisions. However, the local currency has dropped significantly after it was left to market forces, depreciating to ~PkR276/USD.

Participation in the market declined, with daily volumes averaging ~130.78mn shares during the week, compared to ~217.20mn shares in the prior week depicting a loss of 39.8%WoW. Other major news flows during the week included: i) Fed raises rates a quarter point, ii) SBP reserves plunge to $3.07bn, iii) Jul-Jan trade deficit shrinks 31.97pc to $19.632 YoY, iv) IMF identifies Rs2tr hole in budget estimates, v) CPI Inflation for Jan’23 clock in at 27.6% and vi) LPG hits historic high of Rs300/kg. Sector-wise, the top performing sectors were; i) Glass and Ceramics (+4.4%WoW), ii) Pharmaceuticals (+3.9%WoW), and iii) Woolen (+3.6%WoW), while the least favourite sectors were; i) Miscellaneous (-12.7%WoW), ii) Textile Weaving (-5.7%WoW) and iii) Tobacco (-3.8%WoW).

Stock-wise, top performers were; i) GATM (+12.1%WoW), ii) ABOT (+11%WoW), iii) GHGL (+7.8%WoW), iv) COLG (+7.4%WoW), and v) KTML (+7.1%WoW), while laggards were; i) PSEL (-21.2%WoW), ii) GADT (-11.5%WoW), iii) SRVI (-5.5%WoW), iv) PPL (-5.2%WoW), and v) PSMC (-4.9%WoW). Flow wise, individuals were the major buyers with net buy of US$0.32mn, followed by Banks/DFI (net buy of US$0.13mn), while foreign investors were major sellers during the week, with a net sell of US$0.75mn.

Outlook

The market is expected to remain under pressure in the near future mainly attributable to concerns stemming from political and economic fronts that is expected to keep the market movements in check. Any news flow regarding foreign inflows, whether from the IMF or other bi-lateral and multilateral sources, would support the market trajectory. However, the government would have to take difficult decisions to get the IMF onboard, which includes additional revenue collection of PkR600bn and hikes in gas and electricity tariff hikes Therefore, we continue to advise a cautious approach while building positions in the market while we prefer the E and P and Technology Sectors due to dollar-based revenue streams.